Benefits of entry control: the Russian case

Abstract

This article compares an original theory of gatekeeping and public choice theory, confronting them with data from an emerging market, Russia. It argues that the former theory produces riskier predictions than the latter one. The Popperian criteria for falsification of a theory suggest that the riskier the predictions the theory produces, the more confidence we have in the outcomes of its falsification. Theory of public choice predicts that either the government wins and business loses (the tollbooth hypothesis) or business wins and the government loses (regulatory capture theory). The theory of gatekeeping predicts that both the government and business win. Furthermore, the third agent's (the population's) pecuniary interests are also supposedly associated with the interests of the first two agents. A series of econometric tests using sub-national data from Russia show that the gatekeeper's interests are indeed positively associated with the interests of the businesses that manage to get admitted to the field of transactions. The population's interests also turn out to be correlated with the interests of the gatekeeper and business. The gains of the three agents tend to be unequally distributed, however. The market system in Russia ultimately works in the interests of state representatives who assume the gatekeeper's role and to a lesser extent in the interests of selected businesses.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

^1. The former US Secretary of Defence, Donald Rumsfeld, defined terrorism as an ‘unknown unknown’: ‘There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don't know we don't know’ (US Department of Defence 2002). A financial crisis would be a ‘known unknown’ in these terms.

^2. Case studies and qualitative data are actively used by original institutionalists and some other heterodox economists.

^3. This term is commonly used in Russia to describe efforts focussed on enhancing discipline within the state apparatus, to increasing state servants' compliance with the orders of their superiors and to subordinating all branches of power and all authorities, including regional and municipal, to a single centre, namely, the Presidential Executive Office.

^4. Out of 83 subjects only 79 were retained for the analysis. Chechnya was excluded owing to low data reliability. Out of four autonomous districts only one, Chukotka, is a subject of the Russian Federation in its own right, whereas Yamalo-Nenets, Nenets and Khanty-Mansi districts are administratively subordinate to other regions.

^5. Before 2004 the governors of Russian regions were elected; since then they have been appointed by the President. In these circumstances a governor's political survival refers to his or her chances of being reappointed for another term. A similar ranking was produced in 2000–04 by experts of the Moscow Carnegie Centre for the purpose of assessing the regional elites' strategies in a more democratic environment.

^6. Row 010, account No 20700000000000180 in the Russian system of public finance.

^7. A tolerance of less than 0.20 or 0.10 and/or a variance inflation factor (VIF) of 5 or 10 and above indicates a multicollinearity problem. The values of these measures for Capital funds were 0.028 and 36.091 respectively, for GRP per capita: 0.065 and 15298, for Population: 0.2 and 4.997.

^8. Represented by Harberger's triangle and Tullock's quadrangle.